SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                              --------------------

                                   FORM 10-KSB

                                 CURRENT REPORT

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended February 28, 1997

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Transition Period from_____ to _____

                        Commission File Number 33-31092-C

                               METRO OPTICS, LTD.
             (Exact name of registrant as specified in its charter)

           Delaware                                       36-3689332
  (State or other jurisdiction of                  (I.R.S. Identification
Employer corporation or organization)                       Number)

1101 Stewart Avenue, Garden City, New York                  11530
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number, including area code  (516) 227-1262

Securities registered pursuant to Section 12(b)
of the Act:                                         None

Securities registered pursuant to Section 12(g) 
of the Act:                                         Common Stock, $.01 par value

     Check  whether the issuer:  (1) filed all reports to be filed by Section 13
or 15(d) of the  Exchange  Act during  the past 12 months  (or for such  shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes____  No __X__

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  SB  contained  in  this  form,  and no  disclosure  will  be
contained, to the best of registrant's 

<PAGE>

knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part III of this Form 10-KSB or any  amendment to this Form 10-KSB.
[X]

     Issuer's revenues were $2,555,422 for its most recent fiscal year.

     On  November  12,  1997,  the  aggregate  market  value of the  voting  and
non-voting common equity held by non-affiliates was $0.

     The number of shares of Common Stock outstanding as of October 15, 1997 was
14,363,754.

                                        2

<PAGE>

                                     PART I

Item 1. Description of Business.

Organizational History

         The  Company  was  incorporated  in the State of  Delaware on April 11,
1989.  The Company's  headquarters  are located at 1101 Stewart  Avenue,  Garden
City, New York 11530, telephone no. (516) 227-1262.

         In January 1995, the Company, formerly known as Oakbrook Capital, Inc.,
acquired 100% of the issued and  outstanding  stock of Metrovision  Enterprises,
Inc.  ("Metrovision")  in exchange for an  aggregate of 5,206,666  shares of the
Company's  Common Stock and warrants to purchase  693,666 shares of Common Stock
at $1.50 per share.  The acquisition was accounted for as a reverse  acquisition
and the  historical  financial  statements of  Metrovision  are now those of the
Company.  Immediately after the aforesaid  acquisition,  the Company changed its
name to Metro Optics, Ltd.

         Between 1989 and 1994,  Metrovision  opened eight retail optical stores
in New York State.  These stores were  located in Rego Park (1989),  Carle Place
(1991),  Hempstead (1991),  Hicksville (1992), Garden City (1994), Staten Island
(1994), Massapequa Park (1994) and Hartsdale (1994),  respectively.  Such stores
targeted price conscious  shoppers in the New York  Metropolitan  area. On April
14,  1994,  the  Company  entered  into a  license  agreement  with  The  Caldor
Corporation  ("Caldor"),  pursuant  to which it  became  the  exclusive  optical
concessionaire in certain Caldor  locations.  The Company operated thirteen (13)
Caldor optical centers until Caldor declared  bankruptcy in 1995. The closing of
these Caldor optical centers had a material adverse effect on the Company. These
closings  resulted  in the  Company  sustaining  significant  losses from unsold
inventory and substantial indebtedness.  As of the date of this report, only the
Rego Park,  Carle Place,  Hempstead,  Hicksville and Staten Island locations are
still in operation.  These  subsidiaries were incorporated under the laws of the
State of New York.

         The Company desires to expand its operations through the acquisition or
merger of certain retail optical  centers  currently  owned by the principals of
the Company,  Dr.  Kolman Brown and Dr. Harris Mann, as well as centers owned by
non-affiliated  parties.  Drs.  Brown and Mann  currently  own and operate eight
optical  centers in New York under various names.  The Company  intends to merge
with five of the eight  entities  owned by Dr. Mann and Dr. Brown (see  "Certain
Transactions").  The Company  also  intends to pursue the  acquisition  of other
optical stores which are not controlled by Drs. Brown and Mann.

Acquisitions of Additional Retail Outlets

         The Company  intends to acquire three retail vision  centers  currently
owned by Drs. Brown and Mann. The Company will simultaneously  acquire two other
retail vision  centers,  one of which is majority  owned by Drs. Brown and Mann.
These subsidiaries are Eye Encounter 


                                       3
<PAGE>

Inc., Eye Works Optical Inc.,  Harkoloptics  MV Operating  Inc., RM Eyewear Inc.
and Fordham Eyes,  Inc. The Company intends to issue to Drs. Brown and Mann, and
others,  an  aggregate of  12,257,929  shares of the  Company's  Common Stock in
exchange for the acquisition of 100% of each eye care facility. These facilities
are  located in Bronx and  Brooklyn,  New York.  The Company  believes  that the
addition of these  facilities  will allow the Company to  experience  savings in
connection with inventory  purchases,  thereby allowing its pricing to consumers
to  be  more  attractive.   The  terms  of  the  Company's  acquisition  of  the
subsidiaries  were not  negotiated  at  arms-length.  Drs.  Brown and Mann,  and
members of their family,  have interests in other eye care centers which are not
being  acquired  by the  Company.  There can be no  assurance  that  such  other
facilities in which Drs. Brown, Mann and/or their families have an interest will
not  be  acquired  by the  Company  in  the  future.  The  terms  of any  future
transactions between the Company and Drs. Brown, Mann and/or their families will
not be the result of arms-length negotiations.

Products and Services

         The Company is primarily  engaged in the  operation  and  management of
five retail vision centers  located in Long Island and Staten Island,  New York.
Each vision  center  provides a full  spectrum of eyewear  products and eye care
services to the general public.  The Company maintains an on-premises  inventory
of approximately 2,500 eyeglass frames,  3,000 pairs of spectacle lenses and 300
contact  lenses of varying  prescriptions,  along with a variety of  sunglasses,
eyeglasses,  eyeglass cases,  eyeglass  accessories and contact lens accessories
and solutions in each of its visions  centers.  The Company's goal is to provide
one-hour  service to customers in most  instances.  The Company's  assortment of
products include both moderately priced and designer eyeglass frames and branded
and private label contact  lenses.  The Company seeks to offer a broad selection
of products which are generally priced below competitor prices.

         A  licensed  optometrist  or,  in some  cases,  an  ophthalmologist  is
available  on the  premises  of each  optical  outlet  at such  times  as may be
appropriate for a particular  location.  An optometrist or ophthalmologist  will
either  be  employed  by the  Company  directly  or  self-employed  at a company
location.  The licensed  optometrist or ophthalmologist  will provide eye exams,
fit contact  lenses and offer  other  similar  services.  Such  services  enable
customers to determine their prescription and other eye care requirements and to
obtain eyewear in a single visit.

         The Company  seeks to  replenish  its  in-store  inventory  on a weekly
basis. This is intended to limit its aggregate  inventory carrying  requirements
while offering an ample  selection of product for  customers.  For eyeglasses or
contact lenses in sizes or prescriptions not in stock  on-premises,  the Company
is usually  able to obtain such items  within 24 hours.  Inventory  is purchased
from various suppliers with alterative sources available for most products.


                                       4
<PAGE>

Marketing Strategy

         The Company seeks to offer a full complement of affordable eyewear in a
comfortable  and  attractive  setting.  Management  believes that retail optical
stores  offering  discount  prices  often  compensate  for the low prices with a
low-end appearance.  The Company believes that the concept of affordable eyewear
being sold in an upscale  setting has worked well in its established  market.  A
typical  Company retail outlet occupies 800 to 1,000 sq. ft. with ample room for
well-designed  merchandise  displays,  ophthalmologist's or optometrist's office
and other  equipment  necessary to provide prompt  service to customers  seeking
rapid  turnaround.  The  Company  believes  that  optical  goods  are  viewed by
consumers  to be a  necessity  and are  therefore  less  sensitive  to  economic
conditions.

         The Company's marketing strategy is aimed at emphasizing guaranteed low
pricing convenience of location, superior service, attractive  customer-oriented
store design,  knowledgeable sales and professional  personnel and a broad range
of quality merchandise.  The Company believes that customers who comparison shop
generally find advantages from shopping at the Company's  optical  outlets.  The
Company  displays  signs in its optical  outlets  advising that the Company will
guarantee the lowest price  available and guarantee  customer  satisfaction.  In
addition to a broad  selection  of  products,  the  Company  offers eye exams by
licensed  optometrists or  ophthalmologists  and eyeglass fittings and repair by
opticians,   with  rapid  turnaround  on  most  orders.   Returns  are  accepted
unconditionally  when  customers  are not  satisfied.  The Company  believes its
merchandising  philosophy  has  enabled  it to develop a solid  reputation  as a
discounter of quality eyewear products.

         The Company's growth  strategies  include marketing  programs,  such as
selective  use of direct mail  fliers and  radio/television  advertising  during
holiday  periods.  The  Company  has  implemented  a program of  collecting  and
maintaining a computerized data base of customer information that it can utilize
for target  mailings to increase the  frequency of  shopping.  In addition,  the
Company has undertaken new marketing programs, such as enhanced displays of gift
items and an expanded  range of children's  products.  Point-of-sale  literature
concentrating  on  the  benefits  of  specific  products  are  also  prominently
displayed on counters.

         The Company is a member of several  managed  health care  programs  and
provides optical  services to program members.  The Company is a panel member of
Vision Screenings,  Inc. and Comprehensive Professional Systems, Inc., two large
optical managed health care programs serving the metropolitan  area. The Company
believes that its continued  participation  in these  programs and other managed
care programs will provide a constant  source of patients and positive  exposure
in the optical industry.

         The Company  utilizes a wide variety of other  promotional  techniques,
including  free spare pairs and 20% discount cards with an eyeglass  order.  The
Company  also  utilizes  state-of-the-art  diagnostic  procedures  such  as auto
refractors,  which allow the customer to compare  their old  prescriptions  with
potential new prescription prior to examination. The most popular and successful
program includes an offer to pay for a customer's eye examination if the 


                                       5
<PAGE>

patient  makes a purchase  at a Company  location.  This  program is designed to
increase  awareness  of the  availability  of  doctors of  optometry  at Company
locations and to perpetuate customer loyalty.

         In order to encourage personnel to emphasize customer satisfaction, the
Company intends to hold monthly training seminars given by regional  supervisors
that stress  customer  service,  courteous  salesmanship  and technical  product
knowledge.  Periodically,  the Company offers contests and other incentive plans
to increase sales and maintain favorable morale among its employees.

Purchasing

         The Company's  inventory  purchases  include eyeglass  frames,  lenses,
contact lenses,  contact lens solutions and other supplies.  The Company desires
to expand  its  operations  in order to be in a  position  to make  high  volume
purchases from its suppliers in order to obtain  preferential  pricing  programs
from such suppliers.

         It is the intent of the Company to develop a system whereby  purchasing
is done by a central  purchasing  department that will maintain computer records
tracking sales by product and remaining inventory on a store-by-store basis. The
purchasing  department will also obtain ongoing feedback from district  managers
and regional  supervisors  regarding  product trends and sales.  Outlet managers
will have the authority to reorder only certain fast moving items.

         The Company has found that direct drop  shipping by suppliers to vision
centers is more efficient than maintaining a warehouse of inventory,  since most
products  can be obtained  from  suppliers  within 24 hours.  Nevertheless,  the
Company continually reevaluates the benefits of creating a central warehouse.

Competition

         The Company competes with optical chains,  department  stores,  optical
stores and  private  optometrists  in a highly  fragmented  market.  Some of its
larger competitors  include Cohen's Optical,  Sterling Optical and Pearl Vision.
The majority of the Company's  competitors  possess greater financial  resources
than the  Company.  Some of the  Company's  retail chain  competitors  engage in
marketing and promotional programs which are national in scope and which are far
more extensive than the Company's.  Large competitors also benefit from quantity
discounts  with respect to inventory  purchases  which are not  available to the
Company. The Company attempts to compete with its competition in the quality and
consistency  of  its  services,  price,  convenience,   speed  of  delivery  and
selection.

Quality Control

         The  Company  emphasizes  quality  in both its  products  and  customer
service.  Defective or damaged merchandise is returned for manufacturer refunds.
Customer  service is enhanced  


                                       6
<PAGE>

through  an  on-going  program  of  evaluations  by  outlet  managers,  district
managers,  regional supervisors and senior management.  The Company utilizes the
services of an  independent  shopping  company to conduct  periodic  unannounced
telephone and on-site inspections of its optical outlets.

Governmental Regulation

         The Company is subject to a variety of  federal,  state and local laws,
regulations  and  ordinances,  including  state and local  laws and  regulations
regarding  advertising,  zoning,  qualifications  and practices of the opticians
employed by the Company,  and relations  between  independent  optometrists  and
optical  firms.  These state and local  legal  requirements  vary  widely  among
jurisdictions and are subject to frequent change. In addition,  certain products
sold by the Company,  specifically  contact  lenses and contact lens  solutions,
must comply with quality  control  standards  set by the United  States Food and
Drug Administration.

         In New York,  the Company is required to staff vision  centers with one
or more licensed  opticians who fit and dispense  eyeglasses or contact  lenses.
The Company, as well as the independent  optometrists  providing services in the
Company's  vision centers,  from time to time receive  inquiries from regulatory
bodies and industry  competitors  regarding compliance with applicable state and
local  regulations.   The  Company  anticipates  that  it  and  the  independent
optometrists  will  continue  to  receive  and be  required  to  respond to such
inquiries  and  defend  their  practices  from time to time in the  future.  The
Company believes it is in substantial  compliance with all material governmental
regulations applicable to its operations.

         Although governmental  regulation has increased the cost to the Company
of commencing operations and decreased its flexibility in managing its business,
governmental  regulation has not, to date, had a material  adverse effect on the
Company's  overall  operations  or  financial  performance,  or on  its  overall
relationships with independent  optometrists.  It is nevertheless  possible that
new regulations or new  interpretations of current  regulations could materially
increase the Company's cost of doing business or have a material  adverse impact
on the Company's sales by restricting or eliminating the services of optometrist
in the Company's vision centers.

Employees

         As of November 12, 1997,  the Company  employed 24 full-time  employees
and 26 part-time  employees in its five retail optical centers in various phases
of  its  operations  including,  but  not  limited  to,  sales,  purchasing  and
management.   At  Company  locations,   independent   optometrists  perform  eye
examinations  and prescribe  corrective  lenses  (whether  eyeglasses or contact
lenses) as needed.  All doctors of optometry  are required to be licensed by the
jurisdiction  where they conduct  their  practice.  As the number of the Company
optical  outlets  grows,  it will be necessary to hire regional  supervisors  to
oversee  district  managers.  It is  anticipated  that for every  15-20  optical
outlets, the Company will have four district managers


                                       7
<PAGE>

and one regional supervisor  overseeing those outlets. The Company considers Its
present labor relations to be satisfactory.

Item 2. Description of Property.

         The Company  leases its  principal  executive  offices  located at 1101
Stewart Avenue,  Suite 203, Garden City, New York 11530. The Company's  business
is conducted at its five (5) wholly-owned  subsidiaries.  Each subsidiary leases
the space where the retail  optical store is located from  non-affiliated  third
parties. The following is a list of the Company Optical leaseholds:

1.   165 Old Country Road, Carle Place, NY 11514 (expires 2001)
2.   216A North Franklin Avenue, Hempstead, NY 11550 (expires 2002)
3.   Delco Plaza, 265-1 Broadway, Hicksville, NY 11801 (expires 2001)
4.   95-19 63rd Drive, Rego Park, NY 11374 (expires 1998)
5.   Staten Island Mall, 2655 Richmond Avenue, Staten Island, NY 10314 
     (expires 2003)
   
         Leases for these  location are  generally  for terms of ten (10) years.
The Company believes that its relationships with its lessors are good.

Item 3. Legal Proceedings.

         The  Company  is not  currently  a party to any legal  proceedings  the
results  of which it  believes  could have a material  adverse  effect  upon its
business or financial condition. Other than routine litigation incidental to its
business,  there  are no such  proceedings  pending  against  it.  The  Company,
however, is significantly  delinquent in the payment of trade payables and other
debt.  Accordingly,  litigation  may be  instituted  against the Company by such
creditors.  There can be no assurance  that future  litigation  will not have an
adverse effect on the Company.

Item 4. Submission of Matters to a Vote of Security Holders.

         During  the last  quarter of the period  covered  by this  report,  the
Company did not submit any matter to the vote of its shareholders.


                                       8
<PAGE>

                                     PART II

Item 5. Market For Common Equity and Related Stockholder Matters.

         There is currently no public market for the Company's securities

         As of  October  15,  1997,  there  were 103  holders  of  record of the
Company's  Common Stock.  The number of record holders does not include  holders
whose securities are held in street name.

         The Company does not currently pay dividends on its Common Stock. It is
management's  intention not to declare or pay dividends on the Common Stock, but
to retain  earnings,  if any, for the  operation  and expansion of the Company's
business.

Item 6. Management's Discussion and Analysis and Results of Operations.

Background

         The Company is primarily  engaged in the  operation  and  management of
five retail vision centers  located in Long Island and Staten Island,  New York.
Each vision  center  provides a full  spectrum of eyewear  products and eye care
services to the general  public.  The Company  intends to acquire  three  retail
vision  centers  currently  owned by Drs.  Brown  and  Mann.  The  Company  will
simultaneously acquire two other retail vision centers, one of which is majority
owned by Drs. Brown and Mann.  These  subsidiaries  are Eye Encounter  Inc., Eye
Works Optical Inc.,  Harkoloptics MV Operating Inc., RM Eyewear Inc. and Fordham
Eyes,  Inc.  The  Company  currently  maintains  an  on-premises   inventory  of
approximately  2,500 eyeglass  frames,  3,000 pairs of spectacle  lenses and 300
contact  lenses of varying  prescriptions,  along with a variety of  sunglasses,
eyeglasses,  eyeglass cases,  eyeglass  accessories and contact lens accessories
and solutions in each of its visions  centers.  The Company's goal is to provide
one-hour  service to customers in most  instances.  The Company's  assortment of
products include both moderately priced and designer eyeglass frames and branded
and private label contact  lenses.  The Company seeks to offer a broad selection
of products which are generally priced below competitor prices.

Results of Operations

Year Ended February 28, 1997 ("Fiscal 1997)
Compared to February 28, 1996 ("Fiscal 1996)

         The Company's revenues for the Fiscal 1997 decreased to $2,555,422 from
$3,654,875 for the prior year, a decrease of approximately 30%. This decrease is
primarily  attributable  to the  insolvency  and  bankruptcy of Caldor in Fiscal
1996.  Also, the Company  focused its attention and efforts on (i)  reorganizing
the Company through acquisitions;  (ii) privately raising funds to pay down debt
and increase working capital;  and (iii) attempting to bring the Company current
with respect to filing the  required  Securities  Exchange Act of 1934  reports.
Revenues 


                                       9
<PAGE>

are generated  through the Company's sale of eyeglass wear and related services.
The Company has an accumulated  deficit of  $3,470,293,  an increase of $498,698
from the prior year.

Liquidity and Capital Resources

         The  Company's  cash  position  was $47,504 at February  28,  1997,  as
compared  with  ($55,849)  at February 28,  1996,  an increase of $103,353.  The
Company's working capital at February 28, 1997 was ($1,797,628) as compared to a
working  capital of ($778,766) at February 28, 1996, an increase of  $1,018,862.
The increase in cash and working capital primarily  resulted from the raising of
$300,000 in a private offering of the Company's securities,  as described below,
and from the Company satisfying certain outstanding liabilities.

         In  February  1997,  the Company  completed  a private  offering of its
securities  pursuant to Regulation D of the  Securities Act of 1933, as amended,
and Rule 506  promulgated  thereunder.  The Company sold 30 Units at $10,000 per
Unit.  Each Unit  consisted of 233,334  shares of Common Stock,  233,334 Class A
Warrants and 233,334 Class B Warrants.  The Company raised $300,000  pursuant to
the aforesaid  offering.  The proceeds were used to pay down certain  delinquent
obligations of the Company, including tax liabilities.

         In July 1997, the Company offered to the public 25 Units at $10,000 per
Unit in a private  offering of its  securities  pursuant to  Regulation D of the
Securities Act of 1933, as amended,  and Rule 506 promulgated  thereunder.  Each
Unit consisted of a $10,000  promissory note, 70,000 Class A Warrants and 70,000
Class B Warrants.  As of October 15, the Company has accepted  subscriptions for
10 Units.

Fiscal 1996 Compared to
Year Ended February 28, 1995 ("Fiscal l995")

         The  Company did not have  significant  revenues  in Fiscal  1995.  The
Company's  public  offering  closed  in  January  1995  and  the  Company  began
generating  significant  revenues from its Caldor license.  Although the Company
generated  revenues  during  Fiscal 1996,  the Company  experienced  significant
losses from unsold  inventory and incurred  substantial due to the bankruptcy of
Caldor.  The Company's only revenues in prior years from inception to the end of
Fiscal 1995 were  generated  from interest  income earned on the proceeds of the
Company's  initial  public  offering,  which closed in July 1990,  and on a note
receivable.

Item 7. Financial Statements

         The financial  statements of the Company,  including the notes thereto,
together with the report of the independent certified public accountant thereon,
are presented beginning at page F-1.

Item 8. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure.

         Not Applicable.


                                       10
<PAGE>

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a) of the
          Exchange Act.

Directors and Officers

         The  following  table  sets  forth the  names  and ages of all  current
directors  and  officers of the Company and their  respective  positions  in the
Company.

Name                Age        Position
----                ---        --------

Kolman Brown        52         Chairman and President

Harris Mann         56         Vice President, Secretary, Treasurer and Director


         Directors  are  elected  to serve  until  the next  annual  meeting  of
stockholders and until their successors have been duly elected and qualified.

         Kolman Brown was  appointed  the Chairman of the Board and President of
the Company in January 1995. From 1988 to the present,  Dr. Brown has also acted
as Chairman of the Board and  President of the Company.  From 1979 to 1988,  Dr.
Brown developed and operated the Statewide Optical chain of Vision Centers, with
seventeen of such outlets  optical stores  located  throughout New York City and
Nassau County.  Dr. Brown sold his interest in Statewide  Optical in 1988.  From
1980 to date,  Dr. Brown  co-developed  and operates the Eye  Encounter  Optical
chain with Dr. Harris Mann. Dr. Brown attended  Fairleigh  Dickinson  University
and received an O.D.  (Doctor of  Ophthalmology)  from  Pennsylvania  College of
Optometry in May 1968.

         Harris Mann was appointed  Vice-President,  Secretary,  Treasurer and a
Director of the Company in January 1995. From 1988 to the present,  Dr. Mann has
also  acted  as Vice  President,  Secretary,  Treasurer  and a  Director  of the
Company.  From  1980 to  date,  Dr.  Mann co-  developed  and  operates  the Eye
Encounter  Optical chain with Dr. Brown. Dr. Mann received a Bachelor of Science
degree  from the City  College of New York in 1963 and an O.D.  degree  from the
Pennsylvania College of Optometry in 1967.

         Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
during its most recent  fiscal  year,  the Company  believes  that there were no
Section 16(a) reports filed  untimely  during the Company's  year ended February
28, 1997.


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<PAGE>

Item 10. Executive Compensation

         The Company's Summary  Compensation  Table for the years ended February
28, 1997,  1996 and 1995 is provided  herein.  There are no  Option/SAR  Grants,
Aggregated  Option/SAR  Exercises or Fiscal Year-End  Option/SAR Value Table for
the  years  ended  February  28,  1997,  1996 and 1995.  There are no  long-term
incentive plan ("LTIP")  awards,  or stock option or stock  appreciation  rights
except as discussed below.

                           SUMMARY COMPENSATION TABLE

              For the Years Ended February 28, 1997, 1996 and 1995
                       Annual Compensation Awards Payouts

                                                                   Other
Name                                                               Annual
and                                         Compen-                Compen-
Principal                  Year             sation                 sation
Position                   Ended            Salary                 ($)(1)
--------                   -----            -------                ------

Kolman Brown               1997               --                   $1,704.19
                           1996             $19,200                $4,536.26
                           1995               --                     --

Harris Mann                1997               --                   $1,704.19
                           1996             $19,200                $4,536.26
                           1995               --                     --


(1)  Represents health insurance payment.


                                       12
<PAGE>

Item 11.   Security  Ownership of Certain Beneficial
           Owners and Management

         The following  table sets forth, as of October 15, 1997, the record and
beneficial  ownership  of  Common  Stock  of the  Company  by each  officer  and
director,  all officers and  directors as a group,  and each person known to the
Company to own beneficially or of record five percent or more of the outstanding
shares of the Company:

                                     Shares
Officers, Directors and              Beneficially           Percent of Shares
Principal Stockholders               Owned                 Beneficially Owned(1)
----------------------               -----                 ---------------------

Kolman Brown                         2,066,667                  14.4%
Harris Mann                          2,066,667                  14.4%

I. Robert Altman and                 2,800,008(2)               17.3%
 Arline Altman
3151 Hewlett Avenue
Merrick, NY 11566

Albert L. Dorf and                   2,800,008(2)               17.3%
 Rhona S. Dorf
1137 Bloomingdale Rd.
Philadelphia, PA 19115

Joyce Ann Parker                     2,800,008(2)               17.3%
3170 Jason Drive
Bellmore, NY 11710

Phyllis Sherman                      2,800,008(2)               17.3%
2970 Lee Place
Bellmore, NY 11710

All directors,                       4,133,334                  28.8%
executive officers
as a group (2 persons)

(1)      For  purposes of this table,  a person or group of persons is deemed to
         have  "beneficial  ownership"  of any shares of Common Stock which such
         person has the right to acquire within 60 days of October 15, 1997. For
         purposes of computing the  percentage of  outstanding  shares of Common
         Stock held by each person or group of persons named above, any security
         which such  person or persons  has or have the right to acquire  within
         such  date  is  deemed  to be  outstanding  but  is  not  deemed  to be
         outstanding  for the purpose of computing the  percentage  ownership of
         any other person. Except as indicated


                                       13
<PAGE>

         in the  footnotes  to this table and pursuant to  applicable  community
         property  laws, the Company  believes based on information  supplied by
         such persons, that the persons named in this table have sole voting and
         investment  power with respect to all shares of Common Stock which they
         beneficially own.

(2)      Includes 933,336 shares of Common Stock underlying Class A Warrants and
         933,336 shares of Common Stock underlying Class B Warrants. The Class A
         Warrants  and  Class B  Warrants  are  exercisable  at $.21  and  $.36,
         respectively, and expire on February 11, 2000.


                                       14
<PAGE>

Item 12.  Certain Relationships and Related Transactions.

         The Company  intends to acquire three retail vision  centers  currently
owned by Drs. Brown and Mann. The Company will simultaneously  acquire two other
retail vision  centers,  one of which is majority  owned by Drs. Brown and Mann.
These subsidiaries are Eye Encounter Inc., Eye Works Optical Inc.,  Harkoloptics
MV Operating Inc., RM Eyewear Inc. and Fordham Eyes, Inc. The Company intends to
issue to Drs. Brown and Mann, and others,  an aggregate of 12,257,929  shares of
the Company's  Common Stock in exchange for the  acquisition of 100% of each eye
care facility. These facilities are located in Bronx and Brooklyn, New York. The
Company believes that the addition of these facilities will allow the Company to
experience savings in connection with inventory purchases,  thereby allowing its
pricing  to  consumers  to be  more  attractive.  The  terms  of  the  Company's
acquisition of the subsidiaries  were not negotiated at arms-length.  Drs. Brown
and Mann, and members of their family,  have interests in other eye care centers
which are not being acquired by the Company. There can be no assurance that such
other  facilities  in which Drs.  Brown,  Mann  and/or  their  families  have an
interest  will not be acquired  by the  Company in the future.  The terms of any
future  transactions  between  the  Company and Drs.  Brown,  Mann and/or  their
families will not be the result of arms-length negotiations.

         Drs. Mann and Brown,  and members of their  respective  families,  have
advanced  monies  to  the  Company  in the  aggregate  amount  of  approximately
$170,000.  These loans are payable on demand and bear interest at the rate of 8%
per annum.

         The Company entered into a three year  management  agreement dated July
1, 1994 ("Management  Agreement") with Calmet, Ltd. ("Calmet"),  which is wholly
owned by Drs.  Kolman  Brown  and  Harris  Mann.  Pursuant  to the  terms of the
Management  Agreement,  Calmet managed and operated all retail optical locations
owned either directly by the Company or indirectly through its subsidiaries. Dr.
Brown agreed to devote  substantially  all of his business time and attention to
the  management  of the  Company,  and Dr.  Mann agreed to devote so much of his
business time and attention to the  management of the Company as in the judgment
of the Chief  Executive  Officer of the Company  was  reasonably  required.  The
Company agreed to pay Calmet a management fee of $400,000 per year. In addition,
Calmet was to receive 6% of the  pre-tax  profits of the  Company  for each year
that the Management  Agreement was in effect.  Calmet agreed that neither it nor
its principals  would,  during the term of the  Management  Agreement or for two
years immediately following its termination, directly or indirectly, operate any
optical or eyewear facility or business within 10 miles of any location at which
the Company has an existing  optical  location.  Calmet and Drs.  Brown and Mann
agreed  that they would  offer to the  Company  the  opportunity  to acquire any
retail vision  center that they may became aware of after the effective  date of
the  Agreement  (other than any such  vision  center (i) owned by them as of the
date of the Agreement,  or (ii) which,  at the time it came to their  attention,
derived 50% or more of its revenues  from  Medicare,  Medicaid or other  similar
government  entitlement  program  and which is expected to remain in such market
segment)  prior to entering  into any  agreement to acquire  such retail  vision
center.  During  the term of the  Management  Agreement  the  Company  agreed to
maintain  in  effect a life  insurance  policy  in the face  amount  of at least


                                       15
<PAGE>

$2,000,000  on the life of Dr.  Brown,  naming the  Company as  beneficiary  and
provide family medical insurance for Drs. Brown and Mann. Effective February 28,
1997,  Calmet  forgave all  management  fees accruing since the inception of the
Management  Agreement.  The Management  Agreement terminated on July 1, 1997 and
was not extended.

         Certain of the Company's subsidiaries have liabilities to Fleet Bank in
the aggregate  amount of  approximately  $217,000.  Such  liabilities  have been
personally guaranteed by Drs. Brown and Mann. In addition,  such liabilities are
secured by all of the personal  property,  both tangible and intangible,  of the
respective  subsidiaries to which the loans  representing  such liabilities were
made.

         In the event, any of the Company's Class A Warrants or Class B Warrants
are exercised, Dr. Kolman Brown and Dr. Harris Mann would be entitled to receive
aggregate additional shares of Common Stock equal to the number of Shares issued
on exercise of such Warrants,  provided however, that the Company reported gross
revenues  of (i)  $9,000,000  in the fiscal  year prior to the  exercise  of the
Warrants;  (ii) $9,000,000 in the fiscal year after exercise of the Warrants; or
(iii)  $4,500,000 in any two  consecutive  fiscal  quarter after exercise of the
Warrant.

Item 13. Exhibits List and Reports on Form 8-K.

   Exhibit No.      Description
   -----------      -----------

   *2               Agreement  and Plan of  reorganization  dated  November  18,
                    1994,  by  and  among  the  company,   Metrovision  and  the
                    Shareholders of Metrovision.

   *3.1             Articles of Incorporation

   *3.2             Bylaws

   *4.1             Articles of Incorporation

   *4.2             Bylaws

   *4.3             Specimen Common Stock Certificates

   *4.4             Form of Warrant

   *4.5             Loan Note dated  November  16, 1993 between  Metrovision  of
                    Staten Island, Inc. and National Westminster Bank U.S.A.

   *4.6             Continuing  General  Security  Agreement  dated November 16,
                    1993 between  Metrovision of Staten Island Inc. and National
                    Westminster Bank U.S.A.


                                       16
<PAGE>

   *4.7             Corporate  Guaranty Agreement dated August 12, 1993 executed
                    by  Metrovision  of  Hicksville,  Inc.  Metrovision of Carle
                    Place,  Inc.,  Metrovision  of  Rossevelt  Field,  Inc.  and
                    Metrovision of Hempstead, Inc. with respect to the loan from
                    National  Westminster  Bank, U.S.A. to Metrovision of Staten
                    Island, Inc.

   *4.8             Loan Note dated  November  16, 1993 between  Metrovision  of
                    rossevelt Field, Inc. and National Westminster Bank, U.S.A.

   *4.9             Continuing  General  Security  Agreement  dated November 16,
                    1993  between  Metrovision  of  rossevelt  Field,  Inc.  and
                    National Westminster Bank, U.S.A.

   *4.10            Corporate  Guaranty  Agreement dated August 12, 1993 whereby
                    the loan of National Westminster Bank, U.S.A. to Metrovision
                    of Rossevelt  Field,  Inc. was  guaranteed by Metrovision of
                    Hicksville,   Inc.,   Metrovision   of  Carle  Place,   Inc.
                    Metrovision  of Roosevelt  Field,  Inc. and  Metrovision  of
                    Hempstead, Inc.

   *10.1            Stock Option Plan dated April 11, 1989

   *10.2            Management  Agreement  dated as of July 1, 1994 by and among
                    Metrovision Enterprises, Inc. Calmet, Ltd., Kolman Brown and
                    Harris Mann.

   *10.3            First  Modification  to  Management  Agreement  dated  as of
                    January 4, 1995 among Metrovision Enterprises, Inc., Calmet,
                    Ltd., Kolman Brown and Harris Mann.

   *10.4            License  Agreement  dated  as  of  April  14,  1994  between
                    Metrovision Enterprises, Inc. and the Caldor Corporation.

   *10.5            First   Modification  to  License   Agreement  dated  as  of
                    September  (undated) 1994 between  Metrovision  Enterprises,
                    Inc. and The Caldor Corporation.

   *10.6            Letter  Agreement  dated  May  24,  1994  among  Metrovision
                    Enterprises,  Inc., U.S. Sachem Financial Consultants,  L.P.
                    and Andrew Todd Industries, Inc.

   *10.7            Agreement  dated June 16, 1994  between the Company and U.S.
                    Sachem Financial Consultants, L.P.


                                       17
<PAGE>

   *10.8            Financial  Advisory  Agreement  dated Une 23,  1994  between
                    Metrovision  Enterprises,  Inc.  and U.S.  Sachem  financial
                    consultants, L.P.

   *10.9            Agreement  dated June 30, 1994  between Eye Care  Centers of
                    America, Inc. and Metrovision Enterprises, Inc.

   *10.10           Placement  Agent Agreement dated November 18, 1994 among the
                    Company,  Metrovision  Enterprises,  Inc.  and U.S.  Sanchem
                    Financial Consultants, L.P.

   *10.11           Option  Agreement dated January 4, 1995, by and among Kolman
                    Brown, Harris Mann and the Company.

   *10.12           Transfer Agent Appointment dated December 13, 1994.

   *10.13           Management   Agreement  dated  March  17,  1995  between  RK
                    Eyecare, Inc. and Metro Optics Ltd.

   *16.1            Letter of  Wright &  Seibert,  P.C.  dated  March  28,  1995
                    regarding change in certifying accountants.

   *21              Subsidiaries of Company

*   Previously filed with the Securities and Exchange Commission

         (b) No Current Reports on Form 8-K were filed by the Company during the
last quarter of the period covered by this Report.


                                       18
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                            METRO OPTICS, LTD.

                                            By: /s/ Kolman Brown
                                                --------------------------------
                                                    Kolman Brown, President

Dated:  November 24, 1997

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


          /s/ Kolman Brown                                     November 24, 1997
----------------------------------------
Kolman Brown, Chairman of the Board and
 President (Principal Executive Officer)




          /s/ Harris Mann                                      November 24, 1997
----------------------------------------
Harris Mann, Vice President, Secretary and Treasurer
 (Principal Financial Officer and Principal Accounting Officer)


                                       19
<PAGE>

                               METRO OPTICS, LTD.

                              FINANCIAL STATEMENTS
                          AND SUPPLEMENTARY INFORMATION

                                FEBRUARY 28, 1997

<PAGE>

                               METRO OPTICS, LTD.

               FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

                          YEAR ENDED FEBRUARY 28, 1997

                               Table of Contents

Financial Statements:

    Independent Auditors' Report                                             1

    Balance Sheet                                                            2

    Statement of Operations and Accumulated Deficit                          3

    Statement of Stockholders' Deficiency                                    4

    Statement of Cash Flows                                                  5

    Notes to Financial Statements                                       6 - 14

Supplementary Information:

    Accountants' Report                                                     15

    Analysis of Cost of Goods Sold                                          16

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Metro Optics, Ltd.
Garden City, New York

We have  audited the  accompanying  balance  sheet of Metro  Optics,  Ltd. as of
February 28, 1997,  and the related  statements  of operations  and  accumulated
deficit,  and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance about whether the financial  statements are free of misstatements.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and the significant estimates made by management,  as
well as evaluating the overall  financial  statements  presentation.  We believe
that our audit provides a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material respects,  the financial position of Metro Optics,  Ltd. as of February
28, 1997 and the results of its  operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 11 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital  deficiency that raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 11. The  financial  statements  do not  include any
adjustments that might result from the outcome of this uncertainty.


                                                 /s/ Ives & Sultan, LLP
                                       -----------------------------------------
                                       IVES & SULTAN, LLP
                                       Certified Public Accountants

June 25, 1997                                        


                                                                          Page 1

<PAGE>

                               METRO OPTICS, LTD.

                                  BALANCE SHEET
                                FEBRUARY 28, 1997

                                     Assets

Current Assets
    Cash and Cash Equivalents (Note 1c)                             $    47,504
    Accounts Receivable                                                  73,903
    Inventory                                                           269,847
    Prepaid Expenses and Other Current Assets                             4,010
                                                                    -----------
                                                                        395,264
                                                                    -----------

Fixed Assets (Note 3)                                                 1,568,538
    Less:  Accumulated Depreciation                                     493,846
                                                                    -----------
                                                                      1,074,692
                                                                    -----------

Other Assets
    Security Deposits                                                    30,866
                                                                    -----------
                                                                    $ 1,500,822
                                                                    ===========

                     Liabilities and Stockholders' Deficit

Current Liabilities
    Accounts Payable                                                $ 1,173,293
    Accrued Expenses and Taxes (Note 4)                                 555,186
    Current Portion of Long-Term Debt (Note 5)                          110,345
    Current Portion of Leases Payable (Note 6)                           91,402
    Due to Affiliate (Note 2)                                            20,749
    Due to Stockholders (Note 7)                                        241,917
                                                                    -----------
                                                                      2,192,892
                                                                    -----------
Long-Term Debt
    Long-Term Debt - Less:  Current Maturities (Note 5)                  88,955
    Leases Payable - Less:  Current Maturities (Note 6)                 146,848
                                                                    -----------
                                                                        235,803
                                                                    -----------
Stockholders' Deficiency
    Common Stock, $.01 Par Value - 25,000,000 Shares
      Authorized, 7,363,734 Shares Issued and Outstanding                73,637
    Paid-in Capital                                                   2,468,783
    Retained Deficit                                                 (3,470,293)
                                                                    -----------
                                                                       (927,873)
                                                                    -----------
                                                                    $ 1,500,822
                                                                    ===========

The accompanying notes are an integral part of the financial statements


                                                                          Page-2


<PAGE>

                               METRO OPTICS, LTD.

                 STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
                          YEAR ENDED FEBRUARY 28, 1997

Sales and Services                                                  $ 2,555,422

Cost of Goods Sold                                                    1,362,205
                                                                    -----------
Gross Profit                                                          1,193,217
                                                                    -----------
Expenses
    Payroll                                                             539,103
    Doctors Fees and Commissions                                        142,856
    Rent                                                                451,229
    Professional Fees                                                    21,918
    Insurance                                                            29,278
    Repairs and Maintenance                                              14,882
    Payroll Taxes                                                        56,788
    Bad Debt Expense                                                     37,000
    Office and Miscellaneous                                            192,021
    Credit Card Fees and Bank Charges                                    82,137
    Utilities                                                            52,126
    Telephone                                                            33,412
    Advertising and Promotion                                            34,629
    Depreciation                                                         53,713
                                                                    -----------
                                                                      1,741,092
                                                                    -----------

Loss From Operations                                                   (547,875)

Other Expenses
    Interest                                                             13,823
                                                                    -----------

Net Loss (Per Share $0.076)                                            (561,698)

Accumulated Deficit - Beginning
   of Year (as restated - Note 14)                                   (2,908,595)
                                                                    -----------

Accumulated Deficit - End of Year                                   $(3,470,293)
                                                                    ===========

The accompanying notes are an integral part of the financial statements.

                                                                     
                                                                          Page-3

<PAGE>

                               METRO OPTICS, LTD.

                      STATEMENT OF STOCKHOLDERS' DEFICIENCY
                          YEAR ENDED FEBRUARY 28, 1997

                                                                    Retained
                               Common Stock          Paid-in        Earnings/
                            Shares       Amount      Capital        (Deficit)

Balance -
   February 28, 1996      7,363,734     $73,637     $2,468,783    *$(3,082,980)

Net Loss                         --          --             --      (1,271,570)
                          ---------     -------     ----------     -----------

Balance -
   February 28, 1997      7,363,734     $73,637     $2,468,783     $(4,354,550)
                          =========     =======     ==========     ===========

*  As stated - See Note 12.

The accompanying notes are an integral part of the financial statements.
                                                                    

                                                                          Page-4

<PAGE>

                               METRO OPTICS, LTD.

                             STATEMENT OF CASH FLOWS
                          YEAR ENDED FEBRUARY 28, 1997

Operations
  Cash Provided By (Used For) Operations:
     Net Loss                                                         $(561,698)
                                                                    -----------
     Adjustment to Reconcile Net Loss to
        Net Cash Provided By (Used For) Operations:
          Depreciation and Amortization                                  53,713
          Prior Period Adjustment                                       192,473
    Abandonment of Fixed Assets                                        (552,568)
    Accounts Receivable                                                 (36,903)
    Inventory                                                           144,431
    Prepaid Expenses and Other Current Assets                           145,013
    Security Deposits                                                    10,999
    Accounts Payable                                                    358,369
    Accrued Expenses and Taxes                                          403,849
    Due to Affiliate                                                     83,240
                                                                      ---------
                                                                        802,616
                                                                      ---------

 Total Cash Provided By Operations                                      240,918
                                                                      ---------

Financing
 Cash Provided By (Used For) Financing:
    Proceeds From Investors                                             100,000
    Principal Payments on Debt                                         (213,331)
    Payments on Stockholder Loans                                       (80,083)
                                                                      ---------
 Total Cash Used For Financing                                         (193,414)
                                                                      ---------
Net Increase in Cash and Cash Equivalents                                47,504

Cash and Cash Equivalents - At Beginning                                   --
                                                                      ---------

Cash and Cash Equivalents - At End                                    $  47,504
                                                                      =========

Supplemental Disclosures of Cash Flow Information:

    Cash Paid During The Period For:

      Interest                                                        $  13,823
                                                                      =========

The accompanying notes are an integral part of the financial statements.  


                                                                          Page-5

<PAGE>

                               METRO OPTICS, LTD.

                          NOTES TO FINANCIAL STATEMENTS
                          YEAR ENDED FEBRUARY 28, 1997

1.   Summary of Significant Accounting Policies

     a.   Type of Organization

          Metro Optics,  Ltd.(Company) was incorporated in the State of Delaware
          on April 11, 1989 under the name of Oakbrook Capital, Inc. In January,
          1995, the Company  acquired 100% of the issued and outstanding  shares
          of stock of  Metrovision  Enterprises,  Inc.  and  changed its name to
          Metro  Optics,  Ltd. The  acquisition  was  accounted for as a reverse
          acquisition.

          The Company provides retail optical services through five wholly-owned
          subsidiaries  located  throughout the  Metropolitan New York area. The
          Company offers a broad  selection of high quality  eyewear and contact
          lenses at discount prices.

     b.   Current Assets and Current Liabilities

          Current assets and current  liabilities include such items expected to
          be realized or liquidated during the next year.

     c.   Cash and Cash Equivalents

          For purposes of the statement of cash flows, the Company considers all
          highly  liquid  investments  with  maturity of three months or less at
          acquisition to be cash equivalents.

     d.   Inventory

          Inventory primarily is comprised of direct material cost consisting of
          eyeglass  frames,  contact  lenses,   ophthalmic  lenses  and  optical
          laboratory supplies and is stated at the lower of first-in,  first-out
          ("FIFO") cost or market.

     e.   Income Taxes

          The Company  provides  for  deferred  income taxes under the asset and
          liability method,  whereby deferred income taxes result from temporary
          differences  between  tax bases of assets  and  liabilities  and their
          reported amounts in the financial statements.

     f.   Property and Equipment

          Property  and   equipment  are  stated  at  cost,   less   accumulated
          depreciation  and   amortization.   Provisions  for  depreciation  and
          amortization  are computed using the  straight-line  method based upon
          the  estimated  useful lives of the assets,  ranging from seven to ten
          years.  Leasehold improvements are amortized over the shorter of their
          economic lives or the terms of the leases.

     g.   Income Recognition

          A sale and related costs are recognized upon delivery of eyewear. Exam
          revenue is recognized when the professional service is rendered.

     h.   Fair Value of Financial Instruments

          The Company has fixed rates on certain of its debt.  The fair value of
          the debt,  based on current  interest rates  approximates the carrying
          value at February 28, 1997.

          The  estimated  fair  values of the  financial  instruments  which are
          presented  herein have been  determined by the Company using available
          market information and appropriate valuation  methodologies.  However,
          considerable  judgment  is  required  in  interpreting  market data to
          develop estimates of fair value. Accordingly,  the estimates presented
          herein  are not  necessarily  indicative  of  amounts  that  could  be
          realized in a current market exchange.


                                                                          Page-6

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

1.   Summary of Significant Accounting Policies (Continued)

     i.   Management and Consulting Agreements

          On April 7, 1994, the Company signed a financial  consulting agreement
          with William Kravitz, as president of Andrew Todd Industries, Inc. The
          agreement was amended by letter dated May 24, 1994.

          On July 1, 1994, the Company entered into a management  agreement (the
          "Management Agreement") with Calmet, Ltd. ("Calmet"),  which is wholly
          owned  by  Doctors  Brown  and  Mann.  Pursuant  to the  terms  of the
          Management  Agreement,  Calmet  will  manage  and  operate  all retail
          optical  locations  owned by the Company.  The term of the  Management
          Agreement is for three years  commencing July 1, 1994. The Company has
          agreed to pay Calmet,  as a  management  fee,  $400,000  per year.  In
          addition,  Calmet will receive 6% of the pretax profits of the Company
          for each year that the agreement is in effect.  Calmet has agreed that
          neither it nor its principals will,  during the term of the Management
          Agreement  or for two years  immediately  following  its  termination,
          directly or  indirectly,  operate  any optical or eyewear  facility or
          business  within 10 miles of any retail optical  facility owned by the
          Company as of the termination date of the Management Agreement. Calmet
          and  Doctors  Brown and Mann have each  agreed that they will offer to
          the Company the  opportunity  to acquire any retail vision center that
          they may become aware of after the  effective  date of the  Management
          Agreement with limitations as outlined in such agreement.  The Company
          has agreed that during the term of the  Management  Agreement it shall
          maintain  in  effect a life  insurance  policy  in the face  amount of
          $2,000,000 on the life of Doctor Brown naming it as a beneficiary  and
          to provide family medical insurance for Doctors Brown and Mann.

          Effective  February 28, 1997,  Calmet has forgiven all management fees
          accruing since the inception of the management agreement.

     j.   Loss Per Share

          Net loss per share data was  computed by dividing  the net loss by the
          weighted  average  number  of common  shares  outstanding  during  the
          period.

2.   Due to Affiliate

     Due to affiliate consists of the following:

          Eye Encounter, Inc.                                     $20,749
                                                                  =======

     Eye Encounter, Inc. is wholly-owned by the stockholders,  Dr. Brown and Dr.
     Mann.


                                                                          Page-7

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

3.   Fixed Assets

     Fixed assets consist of the following:

                                                  Estimated
                                                 Useful Life
     Furniture and Fixtures                        7 Years          $  856,884
     Leasehold Improvements                        10 Years            711,654
                                                                    ----------
                                                                     1,568,538
Less:  Accumulated Depreciation                                        493,846
                                                                    ----------
                                                                    $1,074,692
                                                                    ==========

     Depreciation expense for the year ended February 28, 1997 was $53,713.

4.   Accrued Expenses and Taxes

     Accrued expenses and taxes consist of the following:

     Payroll                                                          $  9,070
     Payroll Taxes                                                     546,116
                                                                      --------
                                                                      $555,186
                                                                      ========

5.   Long-Term Debt

     Long-term debt consists of the following:

         Metro Optics, Ltd. of Roosevelt Field; loan payable to
           Fleet Bank (formerly Nat West Bank); monthly
           installments of $5,112 through November 27, 1998
           at 8.25% per annum.                                         $ 99,650

         Metro Optics, Ltd. of Staten Island; loan payable to
           Fleet Bank (formerly Nat West Bank); monthly
           installments of $5,112 through November 27, 1998
           at 8.25% per annum.                                           99,650
                                                                       --------
                                                                        199,300
         Less:  Current Maturities                                      110,345
                                                                       --------
         Long-Term Debt                                                $ 88,955
                                                                       ========

     The loans are secured by all of the personal  property,  both  tangible and
     intangible,  owned by the Company and have been guaranteed by the principal
     stockholders, Doctors Brown and Mann.


                                                                          Page-8

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEARS ENDED FEBRUARY 28, 1997

6.   Leases Payable

     Leases payable consists of the following:

         Vanguard Financial Services; 3 optical equipment
           leases; monthly payments of $3,420 payable
           through December, 2001.                                    $159,014

         G.E. Capital Corp.; ophthalmic equipment lease;
           monthly payments of $1,262 payable through
           October, 2000.                                               40,374

         AT&T Credit Corp.; equipment lease; monthly
           payments of $482 payable through January, 1998.               5,303

         AT&T Capital Leasing Services; equipment lease; monthly
           payments of approximately $1,215
           payable through May, 1998.                                   18,224

         First United Leasing Corp.; 3 computer leases; monthly
           payments of $2,375 payable through September, 1997.          15,335
                                                                      --------
                                                                       238,250
         Less:  Current Maturities                                      91,402
                                                                      --------
                                                                      $146,848
                                                                      ========

     All  leases  are  secured  by their  respective  equipment  and  have  been
     personally guaranteed by Drs. Brown and Mann.

     Principal payments on leases payable are estimated as follows:

     Twelve Months Ended
         February 28,
            1998                                                     $  91,402
            1999                                                        59,829
            2000                                                        51,138
            2001                                                        35,881
                                                                     ---------
                                                                     $ 238,250
                                                                     =========

7.   Due to Shareholders

     Due to  shareholders  represents  monies owed to Drs. Brown and Mann. As of
     the date of this  report  no terms  for  repayment  have  been  made and no
     interest has been accrued.


                                                                          Page-9

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

8.   Stock Option Plan

     On April 11,  1989,  the Company  adopted an  incentive  Stock  Option Plan
     ("Plan") under which options  granted are intended to qualify as "incentive
     stock options" under Section 422A of the Internal  Revenue Code of 1986, as
     amended ("Code"). Pursuant to the Plan, options to purchase up to 5,000,000
     shares of the  Company's  Common  Stock may be granted to  employees of the
     Company.  The Plan is  administered  by the  Board of  Directors,  which is
     empowered to determine the terms and conditions of each option,  subject to
     certain  limitations.  As of the date of this report,  no options have been
     granted  under this Plan,  but the Company may elect to grant options under
     the Plan in the future.


9.   Leases and Commitments

     Operating  Leases - The  Company  leases all of its  stores.  These  leases
     expire at various dates through 2003. None of the leases contain options to
     renew.  The leases on stores  generally  provide for payment of real estate
     taxes,  common area  charges and for  additional  rent based  primarily  on
     percentage of sales.

     Future  minimum  lease  payments at February  28, 1997 for each of the next
     five fiscal years and thereafter are as follows:

         1998                                                       $  431,643
         1999                                                          363,467
         2000                                                          341,142
         2001                                                          283,432
         2002 and Thereafter                                            41,771
                                                                    ----------
                                                                    $1,461,455
                                                                    ==========

10.  Public Securities Offering

     The Company is offering for sale 30 Units of its  securities at an offering
     price of $10,000 per Unit.  Each Unit consists of 233,334  shares of common
     stock.  233,334 Class A warrants and 233,344 Class B warrants.  The Company
     is authorized  to issue an aggregate of 25,000,000  shares of common stock,
     $.01 par value,  and 5,000,000  shares of preferred  stock,  $.01 par value
     ("preferred stock").

     Common Stock

     The  authorized   capital  stock  of  the  Company  presently  consists  of
     25,000,000  shares of $.01 par value of common stock.  All such shares have
     equal  voting  rights  and  are  not  assessable.  Voting  rights  are  not
     cumulative, and, therefore, the holders of more than 50% of the outstanding
     shares of common  stock of the Company  can, if they choose to do so, elect
     all the Directors.

     Upon liquidation,  dissolution or winding up of the Company,  the assets of
     the Company,  after the payout of liabilities and after the satisfaction of
     all claims by preferred  shareholders,  will be distributed pro rata to the
     holders of the common  stock.  The holders of the common  stock do not have
     preemptive  rights to subscribe for any  securities of the Company and have
     no right to require the Company redeem or purchase their shares. The shares
     of common stock presently  outstanding  are, and the shares of common stock
     to be sold pursuant to the offering will be, upon issuance,  fully paid and
     nonassessable.


                                                                         Page-10

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEARS ENDED FEBRUARY 28, 1997

10.  Public Securities Offering (Continued)

     Holders of common  stock are entitled to share  equally in dividends  when,
     and as if declared by the Board of Directors  of the Company,  out of funds
     legally  available  therefore after payment of any dividends to the holders
     of the  Company's  preferred  stock.  The  Company  has not  paid  any cash
     dividends  on its common stock and it is unlikely  that any such  dividends
     will be declared in the foreseeable future.

     Preferred Stock

     The Company is presently  authorized to issue 5,000,000 shares of preferred
     stock,  $0.1 par value.  The  preferred  stock may be issued in series from
     time to time with such designation,  rights, preferences and limitations as
     the Board of Directors  of the Company may  determine  by  resolution.  The
     rights,  preferences  and limitations of separate series of Preferred Stock
     may differ with respect to such matters as may be  determined  by the Board
     of Directors,  including, without limitation, the rate of dividends, method
     and nature of payment of dividends, terms of redemption, amounts payable on
     liquidation,  sinking fund provisions (if any), conversion rights (if any),
     and voting rights.  The potential exists,  therefore,  that preferred stock
     might be issued  which would grant  dividend  preferences  and  liquidation
     preferences to preferred shareholders over common shareholders.  Unless the
     nature of a particular  transaction  and  applicable  statues  require such
     approval,  the Board of Directors  has the  authority to issue these shares
     without shareholder  approval.  The issuance of Preferred Stock my have the
     affect of delaying or preventing a change in control of the Company without
     any further action by shareholders.

     Class A Warrants

     The  Company has  authorized  the  issuance of 233,344  Class A Warrants to
     purchase  shares of common stock and has reserved an  equivalent  number of
     shares of common stock for issuance upon exercise of such Class A Warrants.
     No  fractional  shares  will be  issued  upon the  exercise  of the Class A
     Warrants. The Company will pay cash in lieu of fractional shares.

     Each Class A Warrant  entitles the holder  thereof to purchase one share of
     common  stock at a price of $.21 per share  during  the three  year  period
     commencing  on the date of the  Offering  Memorandum.  The Class A Warrants
     contain provision that protect the Class A Warrant holders against dilution
     by adjustment  of the exercise  price in certain  events  including but not
     limited to, stock dividends,  stock splits,  reclassification or mergers. A
     Class A Warrant  holder will not possess any rights as a shareholder of the
     Company solely by virtue of the ownership of a Class A Warrant.  The shares
     of common  stock,  when issued upon the  exercise of the Class A Warrant in
     accordance with the terms thereof,  will be fully paid and  non-assessable.
     However, such shares will be deemed restricted securities under the Act and
     not available  for public  resale unless  registered by the Company or upon
     satisfaction of the provisions of Rule 144  promulgated  under the Act. The
     Company has no  obligation  to register  the Class A Warrants or the Shares
     underlying the Class A Warrants.

     The  Company may redeem the Class A warrants at a price of $.01 per Class A
     warrant  at any time  upon 30 days  prior  written  notice  if the  average
     closing  bid price of the  common  stock has been at least  $3.00 per share
     during the 30 consecutive trading days ending on the third day prior to the
     day on which notice of redemption is given.


                                                                         Page-11

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

10.  Public Securities Offering (Continued)

     At any time when the Class A  warrants  are  exercisable,  the  Company  is
     required  to  have a  current  registration  statement  on  file  with  the
     Commission  and to  effect  appropriate  qualifications  under the laws and
     regulations  of the states in which the holders of Class A warrants  reside
     in order to comply with  applicable laws in connection with the exercise of
     the Class A warrants  and the resale of the common  stock  issued upon such
     exercise.  There can be no assurance that the Company will be in a position
     to effect such action  under the federal and  applicable  state  securities
     laws, and the failure of the Company to effect such action may preclude the
     exercise  thereof.  The Company may amend the terms of the Class A warrants
     but only by extending the  termination  date or lowering the exercise price
     thereof. The Company has no present intention of amending such terms.

     In the event, any of the Company's Class A warrants or Class B warrants are
     exercised,  Dr.  Kolman  Brown and Dr.  Harris  Mann would be  entitled  to
     receive aggregate  additional shares of common stock equal to the number of
     shares  issued on exercise of such  warrants,  provided  however,  that the
     Company  reported gross revenues of (i) $9,000,000 in the fiscal year prior
     to the exercise of the warrants;  (ii)  $9,000,000 in the fiscal year after
     exercise of the warrants; or (iii) $4,500,000 in any two consecutive fiscal
     quarter after exercise of the warrant.

     Class B Warrants

     The  Company has  authorized  the  issuance of 233,344  Class B warrants to
     purchase  shares of common stock and has reserved an  equivalent  number of
     shares of common stock for issuance upon exercise of such Class B warrants.
     No  fractional  shares  will be  issued  upon the  exercise  of the Class B
     Warrants. The Company will pay cash in lieu of fractional shares.

     Each Class B warrant  entitles the holder  thereof to purchase one share of
     common  stock at a price of $.36 per share  during  the three  year  period
     commencing  on the date of the  Offering  Memorandum.  The Class B warrants
     contain  provisions  that  protect  the  Class B  warrant  holders  against
     dilution by adjustment of the exercise  price in certain  events  including
     but not limited to, stock  dividends,  stock  splits,  reclassification  or
     mergers.  A Class B  warrant  holder  will  not  possess  any  rights  as a
     shareholder  of the Company  solely by virtue of the ownership of a Class B
     warrant.  The shares of common stock,  when issued upon the exercise of the
     Class B warrants in accordance  with the terms thereof,  will be fully paid
     and  non-assessable.   However,  such  shares  will  be  deemed  restricted
     securities  under  the Act and  not  available  for  public  resale  unless
     registered by the Company or upon  satisfaction  of the  provisions of Rule
     144  promulgated  under the Act. The Company has no  obligation to register
     the Class B Warrants or the shares underlying the Class B Warrants.

     The  Company may redeem the Class B warrants at a price of $.01 per Class B
     warrant  at any time  upon 30 days  prior  written  notice  if the  average
     closing  bid price of the  common  stock has been at least  $4.00 per share
     during the 30 consecutive trading days ending on the third day prior to the
     day on which notice of redemption is given.


                                                                         Page-12

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

10.  Public Securities Offering (Continued)

     At any time when the Class B  warrants  are  exercisable,  the  Company  is
     required  to  have a  current  registration  statement  on  file  with  the
     Commission  and to  effect  appropriate  qualifications  under the laws and
     regulations  of the states in which the holders of Class B warrants  reside
     in order to comply with  applicable laws in connection with the exercise of
     the Class B warrants  and the resale of the common  stock  issued upon such
     exercise.  There can be no assurance that the Company will be in a position
     to effect such action  under the federal and  applicable  state  securities
     laws, and the failure of the Company to effect such action may preclude the
     exercise  thereof.  The Company may amend the terms of the Class B warrants
     but only by extending the  termination  date or lowering the exercise price
     thereof. The Company has no present intention of amending such terms.

     In the event, any of the Company's Class A warrants or Class B warrants are
     exercised,  Dr.  Kolman  Brown and Dr.  Harris  Mann would be  entitled  to
     receive  additional  shares of common  stock  equal to the number of shares
     issued on exercise of such  warrants,  provided  however,  that the Company
     reported  gross  revenues of (i) $9,000,000 in the fiscal year prior to the
     exercise of the warrants; (ii) $9,000,000 in the fiscal year after exercise
     of the warrants;  or (iii) $4,500,000 in any two consecutive fiscal quarter
     after exercise of the warrants.

     Additional Warrants

     The Company also has  outstanding  an  aggregate  of  7,210,000  additional
     common stock purchase warrants exercisable through February 2002 at a price
     of $.043 per share.

     Reverse Split

     Upon consummation of the offering, the Company intends to authorize a 1 for
     7 reverse split of its common stock,  Class A and B warrants and additional
     warrants,   thereby   substantially   reducing  the  Company's  outstanding
     securities.

11.  Going Concern

     The Company's financial statements have been prepared assuming that it will
     continue as a going concern which  contemplates  the  realization of assets
     and satisfaction of liabilities in the normal course of business.

     Due to  insufficient  assets,  the  Company  has been unable to prepare the
     financial  statements necessary to file required reports under the Exchange
     Act.  Accordingly,  the Company is not current in its reporting obligations
     under the  Exchange  Act.  The  Company's  last filed report was its annual
     report on Form 10-K for the year ended December 31, 1994 and Form 8-K filed
     on January 18, 1995.

     The  Company is  substantially  delinquent  in the  payment of  outstanding
     accounts  payables  and tax  obligations.  The  Company  has  failed to pay
     franchise  taxes due to the State of Delaware for the tax years 1994,  1995
     and  1996.  This  failure  has  resulted  in  the  Company's   Articles  of
     Incorporation being declared void. Accordingly,  the Company is not in good
     standing in the State of  Delaware.  The Company will be required to file a
     Certificate  of  Renewal  and pay  applicable  franchise  taxes in order to
     reinstate the Company's charter and obtain good standing status.


                                                                         Page-13

<PAGE>

                               METRO OPTICS, LTD.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                          YEAR ENDED FEBRUARY 28, 1997

12.  Concentrations of Credit

     Financial   instruments   that   potentially   subject   the   Company   to
     concentrations  of  credit  risk  consist  principally  of  trade  accounts
     receivable.  Accounts receivable arise from the sale of eyewear and contact
     lenses products to Unions.  The Company performs ongoing credit evaluations
     of its customers' financial condition, and generally requires no collateral
     from its  customers.  The  Company's  credit  losses are subject to general
     economic conditions of the optical industry.

13.  Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions   that  affect  certain   reported   amounts  and  disclosures.
     Accordingly, actual results could differ from those estimates.

14.  Prior Period Adjustment

     Prior  period  adjustment  represents  adjustments  to the  books  of Metro
     Optics,  Ltd for years prior to fiscal year ended  February 28, 1997.  They
     consist of the following:

         Beginning Inventory                                          $340,945
         Operating Expenses                                             23,612
         Deferred Taxes                                                 68,633
         Payroll Taxes                                                 151,337
         Prepaid Expenses                                               17,590
         Leasehold Improvements (Net of 
            Depreciation) for Closed Stores                          1,260,496
         Loss on Investment                                              6,000
                                                                    ----------
                                                                     1,868,613
         Accumulated Deficit - Originally Reported                   1,039,982
                                                                    ----------
         Accumulated Deficit - Restated                             $2,908,595
                                                                    ==========

13.  General

     For  purposes of the  statement of cash flows,  the prior year's  financial
     statements have been reclassified for prior period adjustments.


                                                                         Page-14

<PAGE>

                 ACCOUNTANTS' REPORT ON ADDITIONAL INFORMATION

Board of Directors
Metro Optics, Ltd.
Garden City, New York

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial  statements  taken as a whole.  The  analysis of cost of goods sold is
presented for purposes of additional  analysis and is not a required part of the
basic  financial  statements.  Such  information  has not been  subjected to the
auditing procedures applied in the audit of the basic Financial Statements, and,
accordingly, we express no opinion on them.

                                                 /s/ Ives & Sultan, LLP
                                       -----------------------------------------
                                       IVES & SULTAN, LLP
                                       Certified Public Accountants

June 25, 1997                                                    


                                                                         Page-15

<PAGE>

                               METRO OPTICS, LTD.

                            SUPPLEMENTARY INFORMATION
                          YEARS ENDED FEBRUARY 28, 1997

                         ANALYSIS OF COST OF GOODS SOLD

Inventory - At Beginning (as restated)                              $  414,278

Purchases                                                            1,217,774
                                                                    ----------
                                                                     1,632,052

Less:  Inventory - At End                                              269,847
                                                                    ----------

                                                                    $1,362,205
                                                                    ==========

See accountants' report on supplementary information.              


                                                                         Page-16
<PAGE>

                               METRO OPTICS, LTD.
                                 BALANCE SHEETS
                                FEBRUARY 28, 1996

                                     ASSETS

Current Assets:
Cash                                                                 $  (55,849)
Inventory                                                               414,278
Accounts Receivable                                                      37,000
Due from Affiliates                                                      93,577
                                                                     ----------
  Total Current Assets                                                  489,006
                                                                     ----------

Fixed Assets:
Fixed Assets (net of Accumulated Depreciation)                        1,128,405
                                                                     ----------
  Total Fixed Assets                                                  1,128,405
                                                                     ----------

Other Assets:
Security Deposits                                                        41,865
                                                                     ----------
   Total Other Assets                                                    41,865
                                                                     ----------

TOTAL ASSETS                                                         $1,659,276
                                                                     ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable                                                     $  759,073
Deferred Rent                                                           131,894
Current Portion - LT Dept                                                11,545
Payroll Taxes Payable                                                   365,260
                                                                     ----------
   Total Current Liabilities                                          1,267,772
                                                                     ----------

Long Term Liabilities:                                                   
Loan Payable                                                            652,725
Loan Payable - Affiliates                                                15,187
Loan Payable - Shareholders                                             189,766
                                                                     ----------
   Total Other Liabilities                                              857,678
                                                                     ----------
                                                                         
Shareholders' Equity:                                                   
Capital Stock                                                            73,637
Paid in Capital                                                       2,368,784
Accumulated Deficit                                                  (2,908,595)
                                                                     ----------
   Total Shareholders' Equity                                          (466,174)
                                                                     ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $1,659,276
                                                                     ==========


                                                                         Page-17
<PAGE>

                               METRO OPTICS, LTD.
                STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
                          YEAR ENDED FEBRUARY 28,1996

Sales and Services                                                   $3,654,875

Cost of Goods Sold                                                    1,792,368
                                                                    ----------- 

Gross Profit                                                          1,862,507
                                                                    ----------- 

Operating Expenses:
   Payroll Expense                                                      174,123
   Telephone                                                             60,522
   Advertising and Promotion                                             33,463
   Cleaning and Rubbish Removal                                           6,697
   Repairs and Maintenance                                                4,902
   Architect Fees                                                         8,000
   Security Systems                                                       7,711
   Professional Fees                                                     24,200
   Common Expense                                                           837
   Gross Salaries                                                     1,653,950
   Utilities                                                             60,632
   Rent                                                                 432,417
   Postage                                                                6,695
   Insurance                                                             51,021
   Equipment Leasing                                                    147,063
   Auto Expense                                                             977
   Office Expenses                                                      304,797
   Temporary Personnel                                                    5,252
   Charitable Contributions                                                 265
   Bank Charges                                                          22,272
   Fees and Penalties                                                     2,827
   Interest Expense                                                      35,376
   Miscellaneous                                                        125,523
   Depreciation Expense                                                 255,912
                                                                    ----------- 
      Total Expenses                                                  3,425,434
                                                                    ----------- 

Net Loss Before Disposition of Assets                                (1,562,927)

Disposition of Assets                                                (1,260,496)
                                                                    ----------- 

Net Loss                                                             (2,823,423)

Accumulated Deficit at March 1, 1995                                    (85,172)
                                                                    ----------- 

Accumulated Deficit at February 28, 1996                            $(2,908,595)
                                                                    ===========